You are here

Low-skilled Jobs in Sweden - A Pipe Dream?

Posted by Editor on Sunday, 3 September 2017

Is it possible to create large numbers of low-skilled jobs in Sweden?

Representatives of the Government, political parties, and various labour market organisations commonly state that Sweden must create a large number of low-skilled jobs to enable an increasing number of low educated citizens to support themselves. To contribute to the Swedish economy most of these jobs must be commercial and not invented by politicians and paid by taxpayers' money. This is a fact that seldom is discussed.

I don't believe it is possible to create commercial low-skilled jobs in Sweden after a period of 50 years when we successfully have done everything possible to get rid of such jobs. They are and must be low paid to correspond to their productivity. This means too low to live a decent life in a high cost society like Sweden and much too low to support a family at normal Swedish standards of living.

Background
The rules for minimum wages have made such jobs almost completely disappear from the official labour market (There are only about 5% low skilled jobs remaining, please see Facts below.), although an equal number of such jobs is estimated to still exist in the black market (Ref: https://timbro.se/arbetsmarknad/utanfor-manniskorna-utanfor-den-svenska-...). A black market operated by unscrupulous employers and even criminals, that use immigrants and even illegal immigrants and also lure people from low income countries to come to Sweden to work.
The referred report concludes:
"In many immigrant groups their structures, norms, and institutions are stronger than the established society. Those who work on the black labour market have obviously both competence and willingness to work, but are barred from the white labour market due to the prevailing conditions of competition e.g. the high minimum wages. The incentives are such that in comparison with a white job, it often is more profitable to work black, because then it is possible to get different types of social benefits in addition."

The unscrupulous employers are usually not interested in white jobs either because their margins with black jobs are much higher. They can also easily avoid costs for staff insurance and work safety measures. The risk of getting exposed and punished is very low due to inefficient enforcement of the laws.

My conclusion is that the low-skilled jobs do already exist, but they are black market jobs, which are almost impossible to convert to white market jobs unless the labour market subsidies cease, minimum wages are lowered, and extensive supervision is imposed together with improved law enforcement. How realistic is that?

An alternative might be to extend the number of white jobs through an expanded economy and more or less disregard the black market and just let it flourish as it wishes. To ignore the black market is of course very bad from a legislative point of view and very dangerous as it will consolidate parallel societies, but let's for the sake of our understanding do an analysis of a number of existing low-skilled jobs. Before we do that, however, we take a look at the rules for economic support and how they have affected the labour market as a whole:

The very generous rules for economic support and social benefits (Sw: försörjningsstöd) remove most incentives in taking low-paid and consequently all low-skilled jobs. This has actually already happened in many rural municipalities in Sweden. It started already in the Seventies. One level of support was set for all Sweden and that level was calculated on the cost of living in Stockholm, which is much higher than in most rural places mainly due to the cost of homes and a greater need to commute. That reform killed most of the (white) low paid jobs in rural Sweden. Employers in such places could no longer find workers for those jobs even though they were not all low-skilled but only paid less than the social security norm, however, still adequate for these municipalities. To pay more was not possible due to the competitive situation. The solutions were: 1): Outsource the jobs to low-income countries, 2): Automate everything possible such as in manufacturing the use of tooling machines instead of hand tools, robots whenever possible, computers instead of office workers, tractors and specialized machines in farming and forestry, etc. or 3): Ultimately close down or move the whole company abroad. All of that happened! Please see the full length video interview with Hans Jensevik: https://fairsharemediaworld.se/hansjensevik (Unfortunately in Swedish)
This also started the migration from small municipalities to the major cities by people who wanted more than just live on social security.
Therefore we have lots of small municipalities with few white job opportunities but many unoccupied homes and a number of larger cities with a severe lack of affordable homes.

Many of the migrants to the cities do not work with commercial services or with production of useful goods for export and internal consumption but with public services and administration usually paid by taxpayers’ money. Personnel intensive production has to a large extent moved abroad even though head offices and research and development are still in Sweden. Common for almost all remaining jobs is, however, that they require fairly high competence.

Due to the high cost of living in Sweden we cannot go back to labour intensive production of any kind, not even production of simple services, because we do not need that many simple services any more. We must keep and even increase a high level of innovation and efficiency in a global world to be able to create any new jobs at all. To do this we need competence, real top competence, and there is not much room for large volumes of low-skilled jobs that cost the employers more than they produce.

Many other low-skilled jobs, except for jobs at restaurants, cleaning and construction, are mainly seasonal like replanting forests, garden work, picking berries in the woods, harvest strawberries, etc. and nothing to live on permanently in Sweden. When Swedes do such work it is for fun (Yes! Picking berries for your own freezer.) or as part of private enterprises or farms or possibly by school teenagers during their summer vacation.

It is sometimes argued that low-skilled jobs are a road into the labour market and that is certainly true if the person has the ability and wish to learn the language and the culture and simultaneously study and train for a more qualified job and the employer has the incentives to provide instructors. Examples are young people with lacking school education but with ambitions. In that way even temporary, subsidized low-skilled jobs (Apprentice or trainee type) may be useful to reduce unemployment and over time create medium- and high-skilled employees. It is important that such subsidies cannot easily be abused, which they can today. Instead of offering the employee a permanent job after the subsidized period, the employer just give the job to another person, who also are entitled to subsidies, and so on.

Facts
The number of existing low-skilled jobs in Sweden is now about 240,000, which means ~5% of the total work force of 5.2 millions. (Work force is defined as people between 16 and 74 years who pay income tax.) These 5% have remained constant the last 30 years even though total work force has increased with 7% and population with 15%. (Ref. http://www.scb.se/sv_/Hitta-statistik/Artiklar/Stor-andel-utrikes-fodda-...)

In November 2016 there were 11 unemployed low educated persons for each open low skilled position. This figure has increased from 2 per position a few years ago and it is expected to increase further as the number of low educated job seekers are increasing. Currently there are 111,000 missing low skilled jobs. (Ref. http://www.ekonomifakta.se/Artiklar/2016/december/11-arbetslosa-per-enke...)

The conclusion is that we must expand the number of white low skilled jobs with at least 50%. Is that possible? According to above we don’t seem to need lots of low skilled jobs any more. In this context we talk about real jobs that are productive and not subsidized and not only seasonal. In which sectors can we find possible low skilled jobs? Here is a list of typical low-skilled jobs and how many people that are currently (2015, the figures have not changed much) employed in each of them:

We can forget ‘Berry pickers and planters’ as such jobs are only seasonal. The rest represents the kind of jobs that make most of the 240,000 existing low-skilled jobs.
Is it realistic to increase the number of jobs in any of these categories with 50% or more? Let’s analyze:

AnalysisCivil engineering and building construction labourers: Yes, probably if our economy grows correspondingly. However, this is a category where there is a big black market and unscrupulous employers very often use illegal immigrants or people from low income countries, which is much cheaper than paying Swedish minimum wages. According to an investigation by the construction unions there are 50,000 foreign workers in this sector now working in Sweden. Officially there are only 16,000. Not all of them are low-skilled but it’s likely that the difference is mainly low-skilled workers. That would indicate that we have about 30,000 low-skilled jobs, which could be offered to people already living in Sweden. Unfortunately these unofficial workers are paid much less than Swedish minimum wages and therefore the employers would not be interested in offering the jobs to people living in Sweden. Neither would Swedes or people with residence permit take those jobs as pay is less than the social security norm. It is different with the black jobs, which even if they are low paid can be (illegally) combined with social security and thus provide a much higher standard of living than most low-skilled jobs and even high skilled jobs. The risk of being exposed is minimal and the punishment is almost non-existent. Many illegal immigrants also have dual or triple identities, making the cheating even less risky.

Cleaners and home service personnel: Yes, possibly, but we have to grow our economy and make it possible for more people to buy such services. It will most likely require subsidies. A requirement for many home service jobs is that the worker speaks and reads Swedish, which may be a problem with immigrants not interested in getting integrated in the Swedish society. A big black market complicates things just as for the construction sector.

Dockworkers and ground personnel: Expansion of our economy is required but not many jobs will be created and many existing jobs are actually not low-skilled.

Fast-food workers, food preparation assistants, restaurant workers: It’s not very likely there will be many more such jobs. We don’t need that many new or bigger fast-food restaurants. Here we have a big black market too.

Launderers, window cleaners, and other cleaning workers: Perhaps a few more with expanding economy but the total number is rather insignificant and many existing jobs may be replaced by robots.

Manufacturing labourers: No, not very likely as such jobs will be replaced by robots. There is currently a demand for warehouse hands but many such jobs are not low-skilled any more due to advanced logistics systems.

Newspaper distributors, attendants, and other service workers: No, this category will disappear due to digitisation or be replaced by robots.

Recycling collectors: Possibly but the number is quite insignificant.

Street and market vendors: Totally insignificant number although there is probably a grey market of not registered vendors and many vendors are self-employed.

Conclusion
The conclusion is that it will be very difficult to create enough many white low-skilled jobs. The most important requirement is that the labour market rules must be redesigned and minimum wages lowered in addition to stricter law enforcement against the black market. The other requirement is that our economy must grow.

We have had a growing GDP the last years in absolute figures, but per capita it has been almost constant. The growth depends on borrowing by private individuals, by the municipalities, and by government spending. This cannot go on forever and the GDP must increase due to real commercial factors like higher productivity and more export.

To achieve that will not be easy and it will require a number of tough decisions by the politicians and hard work by the people. Unfortunately, the problem is even more complicated due to the automation!

A report from Swedish Foundation for Strategic Research (http://strategiska.se//app/uploads/varannat-jobb-automatiseras.pdf) from 2014 warns that more than half of all jobs in Sweden are at stake due to automation during the next ~20 years. The report concludes that 53% of all jobs (i.e. more than 2.5 million) in Sweden may disappear.
The author (Stefan Fölster) of the report applies the same method as used in a research report (2013) from Oxford University by Carl Benedikt Frey and Michael A Osborne, where they analyse 700 classified jobs in the American labour market. The Swedish report finds a similar effect but even greater than in the USA. An example is that more than 100,000 Swedish jobs in the transport sector will disappear when drivers are replaced by self-driving cars.

If this happens, and it is very probable, we either have to accept an unemployment rate of about 50% or create almost 3 million new jobs, and most of them must be high-skilled, or change our society model profoundly.

50% unemployment is unacceptable in the current kind of economy with already high taxes on labour and a generous welfare system without drastically lowering our standard of living.
To create 3 million new jobs is only possible in an expanding economy and through innovation How realistic is that?
E.g. today we need 30,000 programmers. Where do we find them? Especially as we deport many of the competent ones we already have?

In a coming blog post I will discuss how we may compensate for the loss of traditional jobs by advances in digital technology like AI and AR and VR.